Sentiment Check: Investing 10% of funds into a CRV pool

Status: Draft

Author(s): BuzzedMo

Discussions-to: TODO

Created: 17/08/2021

Implementation (optional): [Added if BIP passes] ‌

Buzzed Summary

We place 10% of our ETH (24.5) into a steady Curve pool, generating yield and acting as a reserve tank for our treasury.

Abstract

This is a proposal suggesting that we put 10% of our capital (24.5 ETH) to work using the Curve stETH pool. This should provide a steady APY and ensure we have stable passive incoom in ETH, while also generating $LDO and $CRV tokens. Curve is also a DeFi stalwart and is considered to be very safe.

The pool can be found here

Below are the numbers at the time of writing:

What to do with these governance tokens can be deliberated later, unless the DAO members wish to discuss and implement a plan for this alongside this proposal. If so, then we can amend this proposal when it goes for a formal proposal based on a poll that can be executed in the comments.

This also gives us exposure to staked ETH via the stETH token. These stETH tokens will generate their own income in time, especially post ETH2 merger.

Motivation ‌

245 ETH is sitting idle in our wallet, let’s put it to work. This also gives us exposure to staked ETH via the stETH token.

Specification ‌ Overview ‌

We fund the CRV stETH pool with 24.5 ETH (10% of our Honeypot) where we will generate APY on the ETH:stETH pair, $CRV tokens, and $LDO tokens

Rationale ‌

We should generate returns for bear holders, otherwise why do we have such a treasury? While I suspect any trading of NFTs (as proposed in defijesus’ post) will likely generate more income, this will generate a steadier flow of incoom and can act as a reserve tank, that we can largely forget about.

Copyright ‌

Copyright and related rights waived via CC0.

Update

It’s come to my attention that I should have provided some info on how Curve works for those of us that didn’t start in the DeFi world. Below are two links that I think explain things pretty well, and do a better job than I ever could.

Update 2

So it seems we have a couple of good pieces of feedback from the community that largely align with my idea (here and Discord), but not necessarily my implementation. Most specifically, it looks a bit like this:

@rootulp makes a good point, we can effectively do this by just swapping for stETH and hodling, as it’ll offer similar returns, offers less smart contract risk exposure, and requires less hassle from us from a management perspective.

@Leach brings up a good point, and something we should certainly decide on. Perhaps this is worth a town hall? For this sentiment check though, I’d say let’s just assume this is the equivalent of a US Treasury bond. Buying into stETH will effectively be risk-free, will produce a steady return (currently 5% or so) and will act more as a piggy bank for us.

My original intent here is to be less of an investment and more of an insurance policy, giving us a backstop to lean on (or ideally forget about because we’re doing well elsewhere).

I also see more desire to use more of the treasury on this measure. So I’m going to also propose we bump this to 32 ETH (~13%, and more symbolic to a full-on validator) and only buy/hodl stETH instead of mucking about with Curve.

Sentiment Check: Put forward formal proposal to invest in stETH

  • hodl stETH at 10% of honeypot
  • hodl stETH at 5% of honeypot
  • nah bruh

0 voters

20 Likes

My only thought would be that for less than 15% you can get up to 32 which is the staking pool number for when ETH swaps to proof of stake? I don’t know tons about it but feels like it might get a better yield?

3 Likes

I like it. Curve is a black hole for me personally as it’s a foundational DeFi protocol that I somehow managed to never use. I like that its battle tested. This sounds like a great use of a small portion of the treasury. I do agree that right now, the yields for a competent NFT trader are unmatched.

2 Likes

Still learning a lot of the staking and DeFi protocols but I like the sound of it from what I did understand!

3 Likes

Makes sense. Something is better than nothing. Also open to hearing investigating additional options that would keep us liquid and in ETH.

All, I’ve updated this post to add some info links about CRV

1 Like

That’s possible, as you’ll get roughly 4-5% (before protocol feels unless we want to fund our own validator), and is something worth considering. The thought crossed my mind when writing this, and I don’t hate it.

I personally believe we should be invested more specifically in the NFT and metaverse space moreso than traditional crypto investments or general DeFi.

I think maybe a proposal deciding what our goals and focus should be in general with our fund investment would be good before we drill down into specific opportunities.

3 Likes

My only thought would be that for less than 15% you can get up to 32 which is the staking pool number for when ETH swaps to proof of stake? I don’t know tons about it but feels like it might get a better yield?

Hosting a validator comes with it’s own costs. If we host an Ethereum validator with a reputable hosting provider (i.e. Allnodes, stake.fish, etc.) we must pay the hosting provider a fee. Fees vary based on provider but Allnodes charges $10 per month and stake.fish charges 0.1 Eth flat fee. Lido charges 10% as commission for the stEth token but I’d argue that logistically it will be easier to convert Eth to stEth with a portion of the treasury rather than having an admin stake 32 Eth and pay the hosting provider fee.

I’m pro a proposal that takes 10%+ of our treasury and converts it to stEth to HODL. I’d argue it’s logistically easier to HODL the stEth token rather than contributing to the Curve pool because we get 5.2% APR on Eth which accomplishes the motivation of this BIIP:

245 ETH is sitting idle in our wallet, let’s put it to work. This also gives us exposure to staked ETH via the stETH token.

Additionally, we won’t have to make a decision regarding selling LDO or CRV because all value will accrue to the treasury in stEth which we want to HODL.

Thanks for putting this proposal together @BuzzedMo !

4 Likes

No harm in broader crypto exposure. The goal here is to increase the size of the treasury. Some of the treasury will be geared towards core NFT exposure / acquisitions but to do that we need to generate income back into the treasury.

2 Likes

I am fine and onboard with “locking and spreading” treasury towards stable staking/ stable LP farming, with recent hacks tho, I would prefer layer1 solutions or some battle tested projects. CRV fits the profile i’d say

2 Likes

Yeah I like the idea of investing some of the pot into CRV to generate return.

1 Like

I’m in favour of this as it allows the treasury to receive a return on ETH while also retaining liquidity.

I think the DAO needs to be mindful that while the NFT space is booming at the moment it should maintain some diversity for better risk-adjusted returns. If almost all honeypot is invested in NFTs, the treasury will be hit hard in the event of an NFT winter.

4 Likes

I love the idea of bbh running a validator, but yeah some good points here against it to take into account.

I support this idea.

I do also think it would be great to work as a group to identify our overall risk tolerance and asset allocation mix. I assume some will have very aggressive goals for the honeypot while others would rather be more conservative.

If we find an asset allocation balance ie. 25% risky plays, 50% moderate risk, 25% low risk or fixed return it may make it easier to decide where funds go.

1 Like

I think this should be a DAO proposal before we make any investments!

At least we could put it in Celsius and generate 5% return . . . not sure of risks of Curve.

Yes great idea. What if we had a schedule that is voted on and agreed that specific % of they honey pot is left, invested in nft, invested in DeFi like curve, invested in land and so on. Determine categories for diversity like you said and risk tolerance and vote on it?

Our idle ETH should be put to work until we use it to purchase something. So more then 10% should be considered, could be done in different risk tranches but I personally see this DAO as risk on investment anyway and would therefore always go for the max yield.

2 Likes

Yes this. Fully support this proposal and all other yield earning proposals moving forward. All ETH should be put to work earning yield in AMMs and other platforms until we come up with plans to use it further (i.e NFT investment fund).